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Beyond COVID - Business Finance
21 May 2020
Most business owners will have been impacted by the Coronavirus outbreak, the vast majority of whom in a negative way. While some food retailers and niche businesses have thrived, the shutdown of vast swathes in the economy has caused many others to cease activities, or reduce them dramatically.
Has government COVID support gone far enough?
Government support today has provided time to pay for various taxes, some modest grants for small businesses, a support scheme for furloughed workers, and a variety of loan schemes.
For many businesses this will have been enough to enable them to survive the crisis, and avoid mass redundancies or cessation of business altogether.
Others will not have been so fortunate. Due to challenges with the banks for CBILS loans around ‘eligibility’ and ‘serviceability’. excluding the issues of potential backlogs and delays caused by the volume of applications, and the complexities of the various schemes.
Questions to ask yourself now
- Have I secured all of the financial support that I need from government packages, and taken all other reasonable cost saving measures?
- If I have, and am able to survive until the situation improves, there is little to do than to keep my business alive and relevant for when things improve.
- If I haven’t, then I should explore the other ‘help’ schemes that are available from the government, and look at other ways of reducing costs such as loan repayment holidays, rent negotiations etc.
- But if I have received all of the help I am entitled to, reduced costs where possible, and still can’t survive financially, what should I do now?
- The options here are to close the business down, and potentially sell or liquidate it if there is value and assets to be realised. However, if there are more liabilities than assets, you may have to consider speaking to an Insolvency Practitioner to get the best advice to safeguard you and your personal assets.
Don’t kick the can down the road, plan for tomorrow today
As you emerge from the pandemic restrictions, it’s vital to plan for tomorrow.
Most of the measures designed to help businesses involve, deferring payments on taxes, loans, or rent and these commitments have been ‘kicked down the road’ like a noisy tin can. None of these commitments have gone away.
Unlike Grants, they have to be paid back, and most have a structure that commence repayments within 12 months of drawdown. In addition, many have interest paid by the government, but only for the first year, after which you are responsible for paying the interest.
The Chancellor has also stated that support for businesses will be ‘wound down’ as the pandemic passes. With the Job Retention Scheme currently running until the end of October, you need to plan now how the loss of this scheme will impact your costs beyond that time.
The UK Government has announced its plan to help high-growth companies through COVID-19 using their Future Fund. This fund is in partnership with the British Business Bank and the Government has committed £250 million to be invested in innovative companies facing financing difficulties due to the pandemic. The minimum investment amount is £125,000 and a maximum of £5 million and will be provided through convertible loan notes (CLNs). However, the investment from the Fund will need to be matched by accredited private investors. To qualify for support, the business must already have received a minimum investment of £250,000 in the five years prior to 19th April 2020. Full details can be found here.
Working together to become stronger
We’re already working with and helping business owners to plan ‘what’s next’ beyond COVID. It’s clear that for many businesses and probably your own that:
- Your business will have a whole different set of financial commitments than before the pandemic.
- Your customers and markets may have changed.
- Your employees may have changed, as will the way they work.
- You will need a completely different business plan, with a new raft of opportunities and threats.
- Your business forecasts will have to be flexible and realistic.
There will of course be winners who emerge stronger from this pandemic. To meet the increased financial demands upon your business tomorrow, you need to make sure that you are one of them.
Ask yourself these questions:
• What payments have I ‘kicked down the road’, and when do I have to pay them?
• When do my Bank loan repayments start, and what will my monthly commitment be?
• How will I budget for a reduction to zero in the JRS support payments?
• How do I reshape my business to cope with all these demands?